for Workers
Severance Agreements
Your employer has presented you with a severance package. In addition to the fear and uncertainty of being terminated you now have mere days to figure out what to do. You are happy about the prospect of severance pay, but should you ask for more? Should you sign the agreement? What legal rights are you giving up? What binding promises are you making to the company? You need answers fast.
Our Nashville severance lawyers provide comprehensive severance review services tailored to your unique circumstances. Contact us at the number above or online for an online case review.
What Is a Severance Package?“Severance Package” usually refers to severance pay along with a severance agreement. A severance agreement is a contract between you and your employer that lays out the terms of your termination. Nearly all severance packages contemplate the same thing: In exchange for you releasing (aka waiving) your legal rights connected to the employment relationship, and making other binding promises, the company agrees to pay you exit money and benefits.
Why Do Employers Offer Severance Packages?Put simply, employers offer severance packages to increase certainty and reduce the risk of future litigation. This makes smart business sense and is like a form of insurance. Often, employees do not even know they have viable legal claims against the company when they agree to waive all legal claims. This information asymmetry always benefits the employer.
Also, companies use severance pay as a hook to get a signed non-compete from you. You must consider the practical consequences of a non-compete provision on your future job prospects before signing. Sometimes a non-compete with a 20-mile radius has the practical effect of being a national non-compete in your particular industry.
The key question becomes whether the amount of pay and benefits offered is fair relative to your legal rights waived and promises made. In limited circumstances federal law or an employment contract requires severance pay to employees or executives.
How Is Severance Pay Usually Calculated?The amount of severance pay varies significantly depending on a host of factors, including the reason for your departure, length of your tenure, your position, size of the company, industry, and the severance agreement terms.
That said, severance pay usually falls within the range of 1-2 weeks of base salary per year of tenure, but only an experienced severance review attorney can properly assess the above factors as applied to your circumstances. Viable legal claims may significantly increase severance pay.
What Is in a Typical Tennessee Severance Package?You need to know exactly what is currently being offered. Severance agreements often contain the following key provisions. Keep in mind, every severance agreement is different and your agreement may differ from the terms below. We always recommend you consult an experienced attorney when making legal decisions.
- Separation/Severance Benefits. This states the severance pay you will receive if you sign the agreement. This is also sometimes referred to as “Consideration.” In simple terms, consideration just means that each party is giving up something as part of the agreement. In severance agreements, the company is giving up money, and you are waiving your legal rights. Severance pay is sometimes paid as a lump sum but is often paid out with regular payroll (which delays your receipt of unemployment benefits).
- Benefits/COBRA. The benefits provision may be separate. It states the date your medical, dental and vision insurance will end. It reiterates that you will receive all required COBRA paperwork, and some companies may provide for company-paid subsidies for COBRA premiums. If your spouse can add you to his or her health insurance, consider asking for the COBRA premiums to be added to your severance pay.
- Release/Waiver. This is what the company is paying for. The release must be made knowingly and voluntarily and generally includes a handful of required provisions. You are waiving your legal rights to all legal claims you may have against the company prior to the effective date of the agreement. Many waiver provisions list specific federal and state employment statutes. Never assume you can get a waiver reversed later (although it does happen in rare circumstances). The enforceability of a given release varies from statute to statute.
- Cooperation. You agree to be available to answer company questions regarding topics and projects you worked on if a dispute arises after your termination, e.g., litigation. An experienced employment lawyer can modify this provision to your advantage.
- Non-Disparagement. You agree not to bad mouth the company or its employees (including management, officers, directors, etc.) to anyone regardless of whether or not the statement is truth.
- Attorney’s Fees. Some of these provisions are written very broadly and require you to pay the company’s attorney’s fees, which could total well into six figures. Some go as far as to require you to pay for investigator fees even if you have not violated the agreement!
- References/Inquiries. This is important, especially during your job hunt. This provision specifies what, if any, information the company can provide to future employers. Most employers limit such references to positions held, rates of pay, and length of tenure.
Before you try negotiating your own severance package, you should be aware of the risks:
- Employer can refuse to honor the original severance offer. In contract law, responding with new terms is generally a rejection of the company’s offer, i.e., you are responding with a new offer that the company can either accept or reject. So the company’s offer may no longer legally exist if you ask for more. Usually the company will still honor its original offer even if it rejects your proposed terms, but it is a risk. If an experienced severance lawyer is involved, the chances of this happening are lower.
- Leaving money on the table. Only speaking with an experienced employment lawyer to discuss your unique facts and circumstances can reveal if you have viable legal claims.
- Risk being sued. For anything from extortion to breach of confidentiality and theft of trade secrets, among others. Although this is rare, it does happen.
- Making statements detrimental to legal interests. Statements you make to the company during the severance negotiation process may come back to haunt you if you sue the company. For instance, if you tell human resources the only reason your boss singled you out for termination was because he does not like you personally, the employer will readily admit this during litigation because it is perfectly legal. It will also use your statement to show your termination, at worst, was caused by a personal vendetta due to personality clashes and not an unlawful reason such as discrimination.
You should hire an attorney when you want to maximize your Severance Package. An experienced Nashville severance attorney will review your severance documents, gather all facts related to your employment history and can bring negotiation skills to the table. Specifically, a severance attorney will be able to:
- Focus on the most important facts of your situation;
- Understand your short-term and long-term goals (personally, professionally, and financially);
- Determine whether you have viable legal claims against the company;
- Negotiate on your behalf or assist you in negotiating yourself (depending on your unique circumstances); and
- Give you peace of mind that you are getting a fair deal and your rights are protected.
Remember that the #1 way to maximize your Tennessee severance package is to know what viable legal claims you have against the company. Most employees have no way to spot or value potential claims on their own. You need to have concrete answers to two questions:
- Has your employer violated any laws?
- If laws were violated, how much is a potential case worth?
If your intuition is telling you something is amiss in your termination (e.g., if you were treated differently than others), immediately contact our firm.
Do not underestimate the peace of mind that comes from having an attorney review your severance package so you never have to wonder if you had legal claims.
Contact an Experienced Severance Package Attorney TodayOur team of Nashville employment lawyers exclusively represents employees in employment disputes. We take pride in our unparalleled personal service.
We offer comprehensive severance review services based on your unique needs and goals. Contact us today for a online case review.